Chris Granger/The Times-Picayune archiveFEMA has offered Louisiana $150 million in compensation for Hurricane Katrina damage, but state officials say $492 million is due.

The high-stakes, high-profile dispute over how much FEMA owes Louisiana for the damage done to Charity Hospital by Hurricane Katrina will go to binding arbitration Monday, with a week-long hearing conducted completely behind closed doors.

The process is supposed to definitively settle the battle between the state and federal government over Charity, though the closed nature of the hearing is inviting criticism of its own.

"This is the way they make decisions in North Korea; it's outrageous," said Jacques Morial of the Louisiana Justice Institute. How, Morial asked, can officials justify closing a proceeding in which "all parties are public and only public dollars are at stake, and, it's an issue of great public interest."

"It won't inspire public confidence in whatever the decision is," he said.

The disagreement has been the most vexing dispute between FEMA and the state since Hurricane Katrina. It led Sen. Mary Landrieu, D-La., to add language to the federal stimulus bill a year ago to create this arbitration process to settle intractable disagreements of $500,000 or more between FEMA and the Gulf states of Louisiana, Mississippi, Alabama and Texas in the aftermath of Hurricanes Katrina and Rita.

The biggest dispute is over Charity Hospital, and the state is depending on a more generous settlement to help pay for a state-of-the-art hospital complex to replace Charity. While the state argues that the hospital was more than 50 percent damaged by the storm and therefore, under the terms of the federal Stafford Act, eligible for the full replacement cost, FEMA has argued that the state's neglect contributed to Charity's condition.

While neither Landrieu's legislation, nor the regulations promulgated by FEMA to enact it, specify that the hearing should be held behind out of public view, FEMA made clear early that the process would not be open.

FEMA was apparently deferring to the practice and preference of the Civilian Board of Contract Appeals, the federal agency that hears and decides contract disputes between private government contractors and executive agencies.

"Arbitration is a form of alternative dispute resolution and forms of alternative dispute resolution are never public, they're private," said Margaret Pfunder, chief counsel of the board. "The board performs alternative dispute resolution in other contexts and under those rules we always keep the proceedings and communications private."

She said the only public record emanating from an arbitration is, as the regulation requires, "a reasoned decision that includes a brief and informal discussion of the factual and legal basis for the decision."

Michael DiResto, a spokesman for the Louisiana Division of Administration, said the state has no problem with a closed hearing. "Arbitration is usually not 'an open hearing,'" he wrote in an e-mail Friday. "That has not been and is not an issue."

The argument for keeping an arbitration proceeding private is that it contributes to a frank, informal and productive exchange and expedited result.

But S. Stephen Rosenfeld, a Boston attorney who two years ago represented former Charity patients who sued to try to force the state to reopen the hospital, said that the law and regulations governing the arbitration process make no mention of it being a closed proceeding, and that the Civilian Board of Contract Appeals was out of line in simply applying the same criteria it applies to its other work in alternative dispute resolution.

On the same basis, Tracie Washington, the managing director of the Louisiana Justice Institute, which has challenged Charity's closing and many of the state's claims about the extent of the damage inflicted by Katrina on the hospital, faxed and e-mailed a letter to Pfunder Friday afternoon, insisting that she ought to be able to attend hearing.

"The issues in dispute are of immense importance to the people of New Orleans," Washington wrote. "It would seriously disserve the public interest to conduct this much-anticipated hearing in private."

Sandra Stokes, executive vice chair of the Foundation for Historical Louisiana, also wrote Stephen M. Daniels, the presiding judge in the arbitration case, pressing the public's "fundamental right to attend this hearing to better understand the decision of the arbitration panel as well as to inspire confidence in the integrity of the proceeding and ultimate outcome on this claim." Stokes noted that a foundation study, cited by FEMA in its submission to the arbitration panel, found that "Charity Hospital was structurally sound and capable of reuse as a first-class medical facility."

Landrieu said she was unfamiliar with why the hearing was going to be closed - "maybe for purposes that I'm not familiar with" that are in keeping with how arbitration is generally conducted.

"But I think whether we'll get real-time access or after-the-time access that there will be a complete discussion publicly of what was reimbursed and what wasn't. ... I think the public has a right to know," Landrieu said. "I think they're just following their usual process."

Pfunder said that according to the usual process, there would be no transcript of the hearing made or released by the board. But DiResto said that "FEMA has agreed to transcribe the proceedings. When made available to the state it will be made public."

In the meantime, the state has or will make public all submissions it makes at the hearing, and will, on the conclusion of the proceeding, release a list of witnesses it called. FEMA plans to call nine expert witnesses who worked on the case in various capacities with the agency.